India Morning Report: Portfolio investment highs let India story dominate

Investment percent gdp
Investment percent gdp (Photo credit: Wikipedia)

As investment flows confirm net positive investments in India on a regular daily basis, making the total for March closer to $3 Bln or close to $150 mln per day (INR 900 Crores) , India and Indonesia keep hopes alive for Global equities and EEM flows remain negative with exits from China, Japan and Korea closing out on any hope for recovery in North Asia with China remaining dull and Japans deficit imports coming at the cost of lower Exports being kept on deficit mirroring the phase of growth investments without concurrent investing flows.

 

6590 levels obviously proved daunting for India Inc and markets returned the gains out of the morning trades after a buoyant day for equities all around, looking for new levels not belying the sad events of 2012 for Corporate India Markets stay away from Banks as markets had a big open on Monday and new levels in private sector banks seem to wait for PSU banks that continue to be neglected for their larger than life NPA sores and aches.

 

Reasons for cheering the performance of Auto and metals however still seem t o be further ahea d on the road to recovery and have hardly earned their stripes. Bank License hopefuls that still include the Aditya Birla Group and a couple of other corporate houses are probably caught unaware by the extra scrutiny imposed by the Poll panel ahead of a new government in steed at the Center. RBI has enough reason to deny corporate houses a chance to play with the banking system but it may be difficult to deny claims of available NBFC models like Aditya Birla Money ( Diversified Financial Services ) AND M&M Financial Services ( Retail unsecured/Auto Lending ) after satisfying the NOHFC structure requirements, giving the CEntral Bank a tytough decision as it probably wants to hand over no more than 4-5 new opportunities

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India Morning Report: Did investors buy into the Rupee last week, and the Suntory deal

Friday’s  closing rushes on the Rupee trade could be just another chimera as the China miasma refuses to scare foreing investors from China and other shallow EMs renamed MINTs. China also reported an improved Services PMI implying the trade situation could improve for it and its partners including Aussie, USA and India. However, things overall continue to look bleak for global growth as dependent on legs of growth in China and Europe.

Europe has been importing more, however, esp as Germany probably focusees on its own consumption for a small break after a Target imposed halcyon end to 2013. Rates are likely unchanged in Central Bank announcements and Global liquidity reprieve trades, may be ephemeral at best as Yellen returns to post snow recovery prognostications to hopefully continue along the same taper gradient $10 Bln in each policy date.

However, not to be confused by the Global Economy’s internecine interactive brusqueness, the India trade remains a leader for the Global benign trend continuing in Equities and HY debt this year and is likely to turn in better performances on the bourses than any other.

The 4.7% GDP score was not so bad except that it included at its best form, not more than 6% contribution from Services. As expected, Agriculture did not continue an extended rebound from Q2 and thus contributed to an overall disappointment for policy watchers with Governor RGR still on the edge of another couple of rate hikes and CPI close to plateauing out at a high 8% itself

Radico Khaitan is one of the bigger winners as the Equity trade in India opens to new bull scenarios, we choosing to watch after every 100 points as traders fill up the gaps and bears might give up most of their extraordinary gains in the following 6 monthsas they take each plateau of waiting for more investors as an inordinate sign of weakness or overconfidence having nbrought the hcicken count home to roost

Volatility remains at an extended low and the PCR below 1, implies one should batten down the hatches as most price levels on your choice investments would carry very little risk on sold puts . SBI and Maruti also proffer extraordinary choice to traders that need financing and are not selling puts ans positional shorts in both continue to dig for lost Mayan Gold, making it at least a year or 1200 levels before they exit with profittaking trades.

JP Associates may be out of the index but is a great plus trade ( opnly post redenomination of the Nifty) while Adani Enterpricses catches supplementary caucus support from the Adani Port bull trade. GAIL may still not make it to mainstrem positional trades or transition into a defensive but we reccommend buying the stock with IDFC and YES, while ICICI Bank and HDFC Bank individually will carry the Banknifty, PSU shorts making the Index tradea patchy non performing long

Foreign buyers saw $2.2 Bln in gross trading on the NSE itself on Friday. The return of bank investors and trading rooms including StanChart and HSBC to the bull trade on the Rupee, counld confirm secular up trades in Asia even as China gets ready for a currency depreciation battle. However, first order of business would be to observe if equities can keep up with the smaller selling that remains part of the trade in the first half of the week as markets start the series at fresh new highs of 6277.

The Sun Pharma and Hindalco trades should catch fire by the middle of the week in that scenario as mainline picks remain good for the goo but new buyers may not get them at better levels . Bharti , ITC and Bajaj Auto continue to hold strength in the consumer investments story and Services PMI returnign tot he green likely for 2014 means aviation, trade and tourism could critically support the good guys from here. The LIC and ONGC/OIL buys for BHEL and IOC are confirmed but sectoral trades aer non existent on either side. Pharma’s big week returning to substitute IT is the one certainty and not an immediate bulltrade so more consolidation is likely this wek esp if the Pharma trade does not kick in. The inevitable short trade on Hero as it yields ground to a bad February sales data will only land blows till 1850 levels as the news f the recovery should kick in the sector after new excise reduction and recovery in buying from March

India Morning Report: (Closed for Shivaratri) Markets hoping to be tested again at 6250 in the new series

At 6240 levels the market achieved yesterday itself, another round of consolidation is due for the markets and with the second round of investing in November having attracted Passive fund investors while the active foreign interests remain bought in, Indian markets unlike China batting on euphemisms and an opaque economy non responsive to new stimuli, India will retain most of the bull interest as it proved at 6000 levels and then two consecutive bump ups in a testy 2014 start .

The March F&O series may see more active Foreign interest returning, but it remains to be seen if markets can continue from here. In any case, markets will increase the propensity to remain flat and one suspects the new correction that laziness induces next week, may be short lived till a volatility of 18 is reached before deep corrections are completed in individual stocks closest to heavy overvaluation, namely the SBI, BOB and other PSU Bank trades among others

I don’t believe India’s increased short term foreign debt situation is causing any fresh payment problems as Oil has decidedly planned to start a bear trade globally and in India and hot money or NDF mispricing does not seem to have the desired hook on the trend, as markets might indeed get a positive pricing kicker from the NDF markets on the currency as long as Oil trades lower and a commodities bearish cycle licks in across the broader spectrum , esp those in demand in China where domestic production has not only suffered but been officially deprioritised.

Indian Fixed Income Markets seem to agree with Governor Rajan that CPI may not trend lower as the Governor sets his sights on an ambitious training target program for inflation thru required government diktat to support the Urjit Patel report. From all signs, however RGR is a pragmatist and given that India will anyway continue under the spectre of high 9% bank rate scenarios, additional rate hikes may actually hit more targeted spots on the consumer inflation , but banks are unlikely to have increased transmission of the available liquidity to the broader markets in terms of reducing extraordinary deposits and increasing effective velocity of money as the investment cycle awaits other signals. RBI also completed paperwork on CDS issuance in Corporate paper ( IG and HY) while the market continues to look for th esecular India pull to deepen India’s debt and Fixed income markets

Expiry 2 pm trades on Wednesday had not seen a sharper cut, but the markets could easily turn any new 6250 positions of sold puts into short interest could have tanked the market back below 6200 levels to watch for as expiry otherwise is a dull newsless affair, the above discussion being mere undercurrents the markets have faced for more than 2 years now. Markets are closed for Shivaratri today

Energy cos, like the OMCs retain a default rating of BBB- . Sahara promoter, Subrata Ray got a rude shock on the delivered judgement yesterday as the court issued him a non bailable warrant and ADB signed a new road project in the backwaters of Chhattisgarh.

India Morning Report: Markets retain new bullish memes (again to 6100)

Markets will close above 6100 again but later afternoon sessions may see more enthusiasm as good economic data could be followed by expected passive investor moves and new EEM flows to show likely coming trends.

HDFC Bank is up and out of the 600-680 move with new targets to probably near 750 levels. Banks will expectedly support the next upmove too, ICICI Bank having made up new routes to at least 1030 levels, probably 1070 A look at some fund portfolios , interestingly shows Axis is indeed out of favor and Infy in a different block of memory unlikely to provide any traders with gains or hedges as it corrects to 3600 levels. Apollo Tyres, India Cements and JP Associates added open interest yesterday as main trends broke tin the nifty drop from 6150 to below 6100 levels. Sree Renuka stake sale does not seem like a trade at all, being a long known and expected unloading by the promoter. Open offer is apparently at a discount but Wilmar is immediattely extinguishing debt worth INR 12 Bln. Bharti is a great buy again in positional trades from 295 levels. Bajaj Auto will likely continue to 1950 levels for a stab at a quick double (century) The Adani Port move you heard today is so true,its the INR 80 Bln JNPT contract.

Japan is celebrating a bullish candle early in the morning as Chinese manufacturing, along expected lines, brushes near contraction levels. Fed minutes from January showed the Fed agreeable to  changing the unemployment targets and thus somemembers eagerness to discuss increasin gthe short term fed rate will likely be ignored as markets start up after a 5-10% cut since the new year. However on the flip side for India, the risk of an inflated Oil bill has increased. External Commercial Borrowing Markets are open for India Inc to increase disposition from, the CAD averted, but the small packet of Coporate External debt, now unsettling India policy markets. Fixed Income Markets and Currency markets would recover from yesterdays dip as the recovery unfolds into a more tangible item of import than just hope traded by domestic equity and consumption markets. KKR is also providing transformational capital in a new (presser in ET) bid, that could soon be emulated by SBI and ICICI as restructured assets hit a new high in the banking system.

A new endeavour at the Central Bank could see proposals to accept some or all the changes reccommended by the FSLRC. The recommendation, are likely to further aim to bridge the gap between Private sector growth memes and the larger PSU counterparts with capacity building and skills development (HR) guidelines

G20 is up later this week, IMF taking the opportunity to underline that currency concerns remain, obviating any choice of policy leadership for India at another G20 edition, India the easiest dog to put down in the revolt of the EM manger. ( twisted, yet really twisted, paraplegic choice and execution of simile (not stimuli) The Ukraine Hryvnia, the Korean Won  and the turkish lira are likely to be the largest exceptions not part of the mainstream in G20 trades and will be dominating the agenda, not to forget the Singapore Dollar which remains a unique economic substitute for the whole block ( try a whole fat analysis) and mexico a member but likely to stay silent too as Australia lead this round (2014)

Jet Airways’ loss in a sedate Airlines quarter, even as its etihad deal now hangs fire  at the Compat ( like the CCI but just the Appellate Tribunal) Jet has loans of INR 104 Bln as of this quarter, hardly $1.7 Bln but apparently 7X of the other nearest competitor. its market share is now less than 20% as it waits for deal approval. The INR 2.85 Bln loss a INR 3.60 Bln deterioration from its year ago profitable quarter, leaving unlisted IndiGo the winner with Sale and Leaseback economics still leaving maintenance bills manageable and the airline scoring on all the busy metro routes. Air Asia is likely to change that if it is allowed to fly. That would be concomitant with changes in regulation allowing all these Indian fliers to book international routes without a track record’ compulsion(Two dogs in the dogfight, Indigo and Jet, why are others even flying? – significant business case and consulting win with free markets allowing portfolio rationalisation).

And as Facebook found its Twitter-alike acquisition for mobile messaging that paid its promoters $19 Bln, India media look to another expat manager in the pile of 55 employees for the India story and there is as usual one solitary reaper, digging away in that bee hive(ant hill)

Kiran Mazumdar Shaw has taken stewardship at IIM Bangalore as Chairman of the Board . IIM also recently saw a new Director joining back from Boston University ( Sushil Vachani)

In other unlisted business, why wouldn’t a new Pharma business story with unlisted Capital or a PE try to fund a great Pharma business , not from a decade old Pharma attempts in Hyderabad and Ahmedabad but elsewhere. Cost of Equity in India is no longer that cheap as the Pharma market still offers unique advantages to scaled businesses in Export markets and domestically, while current entrants are likely limited by the $500 mln market for each generic molecule,a similar cap for the domestic market too, based on a limit to branded volumes in each drug. The model would definitely be more Chinese if it happened but it could really expand the market opportunity both at home and in the US and Europe

How about new moves in the big retail pie, which despite its propensity for political disaster, is still available in at least 4 states. One reason, hitting continuing entrepreneurship as India stands on a big comeback, holding India back would be the virtual withdrawal of Foreign banks from India, assets now down to 7% of the banking system, esp the unlikelihood of a public markets led such revolution makes it imperative that the easy flow of foreign capital to India be capitalised on.

India Morning Report: Predictably rational in the face of regional panic

Coulda’ Woulda’ Arvind Mayaram FDI, Note extinguishing before 2005 (25%) and others

While Goldman Sachs may have repeatedly missed good calls for the search for a political establishment in India, India per se knows better, discounting global EM troubles with considerable ease even as the Rupee inched up to 63. India should also probably try and make a bottom for the markets around 6200 itself, correcting SGX Nifty in those regular moves every year as EM withdrawals again translate into a wonderful opportunity for the second half of the year and India leading the hopefuls in market performance with fund investors probably again going to China and other markets just for rueing the missed opportunity? However that may eventually turn out, the Rupee faces considerable pressure and the RBI policy , a non event as expected, would not definitely reduce the pressure on the Currency. The worst culprit would be the deficit ridden Yen, apparently stimulus itself having lost momentum after month 1 last year having never come back. The second month of a huge trading deficit would imply that BOJ’s encouraging monthly perusal of the Economy just encouraged bond investors into JGBs and they are going strong for now.

There are not really ready funds/positions that can be withdrawn in this rally in India that apparently not just broke stride but flattened all kinks in the new year. Seriously for those feeding the panic though, Ranbaxy? buy trades? honesty now..Similarily failing countries facing high risk of default only count Turkey, Ukraine and Argentina, Venezuela and before that Brazil and Russia having recently faded from trading memories , dataless on India without trading in its bonds counting to CDS data yet, Korea similarily trading a very liquid 70 bp

Sensex is safe at 20800 levels and the Nifty safer at 6100 levels but that is almost totally out of the ball park if and only if markets are actually waiting for Foreign investors to reward India immediately for behaving stoically, which hoefully will not be the case when we close the week on Friday. Global market commentary should see those countin gHousehold debt abd Card spending in sovereign leverage counts receding again in 2014 but Student Loa mounds remain avalable high peak panic buttons back in the US.

Meanwhile Indian cash equities should continue to see accumulation, we still continuing in IDFC, Yes, ICICI Bank and ITC, Bajaj Auto and Bharti. GMR and infracos continue to deleverage and the rising valuations may not be able to bail them out before they complete that deleveraging extending the government’s troubles in looking at Public Private options for financing infrastructure, ever falling behind. The fiscal is already expected to come at 5.4% and is likely to improve from there, that unfed hope being snuffed out in this move on the Rupee( as expected , Turkey and some other currencies have already followed double digit losses after the yen refused to go back below 105 ( to 110)

Tickker updates before 9:30 am include Glenmark not revising guidance (debt at $500mln) and launching Crofelemer and all of Goldman’s merrymen could muster in their five years of India sponsored India bashing was to shuck out one Opto circuits from te ile, having bought 26% stake in the same.

We regret Karl Slym’s death as reported in the Morning headlines. Stay away from F&O baniding of the index and the 6000/6100 puts are no where being fully priced to write/sell safely

Bank Policy Tuesday would likely show india flows an economic condition stabilising with a health Liquidity position and no threats to the CAD with WI likely to fall again post policy on ag gained from the Vegetable price drop in November

Glenmark’s up 4% on 10 am trades (featured EarningsTalk/cxotalk on ET Now)

India Morning Report: 6250 again, naturally! O-O O-O

Asian markets do tick down slightly probably because of no Commerce in the financial sector as US markets are closed.

Even without anything much happening locally, The Chinese GDP underperformance at 7.7% was unlikely to be the markets’ concern here our export markets in China safe and the 9.6% production improvement and signs of bullish trades in Copper and other metals. India’s 6% forecast is hopelessly over optimistic and thanks to the networks avoiding the entire China update the fact of FDI non interest is unlikely to bear on market sentiment, and today, and in all 2014, this is a good thing! WPI hit a sharp floor at 6.1% and may breach much lower lewels with core inflation already below 2% Core inflation was basically flat.

In the midst of results season, the positive surprise markets did not expect and despite attempts will continue to be marginalized, is Wipro’s back to back second quarter of gains of 27% on year on profits but F&O markets are trading that and the last weeks IT news pretty feverishly /robustly. However, this interest is mostly maintaining shadows of activity while the Bank stocks get reassessed yet again. The realization that Markets were going to hold 6250 was all too evident in the one way candle of Friday, the 6 hours of sloping down, accelerating wantonly almost after 1430 hrs to achieve 6250 marks

Interestingly, a well-developed hedge fun industry would certainly have seen a short strategy for IT esp on WIPRO from some entrepreneurial trader after this bout of strong results, esp with WIPRO tempting fate and unlikely to beat history ( like Morgan Stanley did, Friday night)

Bajaj Auto and IDFC are my longs this week and will probably score very high as new funds enter the market and get earmarked to the new universe of stocks added in the buy lists ( ET’s Volume breakout series is a helpful ready reckoner, but I doubt you’ll easily find those mix tapes /snips on the ET Now carousel. Go figure)

Actavis may be a strong boost for Aurobindo with almost $8 in earnings in the last four quarters. However Aurobindo is buying its European operations with a EV of $1 Bln apparently ( $320 mln in annual sales) and obviously an easy divestment for ACT and the news has seen a $14 or 8% jump in the week’s trading in the US. After hours trading added $2 on the news . The synergies come from the operations tie -up with the 200 strong pipeline at Actavis

Gold’s busy start in this year’s trades, enthuse Indians but they have traded less of the metal under clampdown driving prices down in 2013 and the story is likely to repeat from a higher watermark below 30,000 this week

Comm stocks lead the indices back after a quick crash mid week on ticker news. Isn’t Debt trading news looming from the Central Bank?  Meanwhile if IRFs had been actively traded the rates started the great slide from 8.8% levels and would probably close  a 100 bp lower in due course whence RBI will return to relaxing the 7.5% Reporate ( excluding the 7.75% last tick forced on by the new Governor) Floating Funds would have a few investors more and any survivors of regulations may have new FMPs to this sector, but will likely be late again. Meanwhile the 10 year can well trade below 8.5% this week.

Energy stocks looked good for this week as well, but it seems there is a new LPG subsidy likely on the ticker for them. Kotak and a host of mid-caps report tomorrow and Dabur and M&M(Fin) follow HDFC with Biocon also reporting on Wednesday.

Midcap indices will probably harness a lot of gains in the week, none of them ready for a harvest of Sell on news tomorrow or Wednesday Avoid the L&T trade tomorrow unless you are fairly clued in to a tepid results expectation in the market

Edelweiss also reports Friday but the crown in the jewel should be Glenmark, that has already up since last week from 500 levels

India Morning Report: The gradual Taper encourages a rally, India indescribable yet?

English: Skyline of Mumbai from across Back Bay.
English: Skyline of Mumbai from across Back Bay. (Photo credit: Wikipedia)

India seems to be locking itself into a no man’s land as the nations punters join the global hordes celebrating the slow Taper on Bernanke’s going away announcements yesterday. ET Now in the meantime has continued with finding obscure (GRE: obfuscation..) commentators on key event dates. CNBC 18 wins again. The issue we are raising is at a different dimension(d-axis) than the assumed obstinacy to be different or that of even the fundamentals of a recovery being spelled differently this side of the Himalayas.

Meanwhile what is looking risky even as Asia applauds the thinking behind the taper, that India’s currency markets try the haywire trade still hoping for an aftermath in the Rupee as the Rupee opens to 62.30 levels. Equities will start the day at 6250 levels and while others posit a rannge of 6200-6350 , the day might yet spring a surprise or two before noon trades. Anyway equities are back above 6200 and GMR is back among large bidders even as they exit Istanbul. Also, NSEL promoters in J Shah and Financial Technologies have been duly censured and MCX would soon be owned buy another consortium of Indian Institutions. Taper could have been abslutely a non news in the Indian currency markets too and the open quotes are a sign that shallow trading costs a lot in adverse selection prmiums to the currency’s bid ask spread.

HDFC Bank’s application for  increasing FII limits to 49% pends with Axis Bank’s application for a relaxation in a similar ceiling and both will be leading bullish plays today.  Assuming that currency markets just wanted to explore the possibility of a significant negative impact of global liquidity being withdrawn , India’s preeminence as a investing destination in the new post crisis world stands. The $34 Bln in FCNR deposits aart, because the Infrastructure situation in the country is unlikely to improve from current vies of coalition governments even for the BJP, the risk remains that India investments will remain confined to a NDF market in currency , smalleer Indiab Bull boutiques with no presence otherwise and at best at 50% of the pace China specific and China sympathetic investments in South East Asia. Singapore and Korea too are not looking for more than a flagship investment or two to artner with India in ther growth run. However, none of that impacts the fundamentals of India Inc and the rally we have outlined since August is rel and given US and European Banks and institutions will increasingly be constrained in the coming months given other investment and Capital constraints, or the recalcitrant DIIs recognising any new levels, Real investors have to sustain this rally, neither retail nor from OECD institutions.

The Yen also got a boost from the Taper trade, while India and other trade partners have increased trade with China in the last few months over its traditional partners as both Industry growth charters in China including European imports and Resource exports from Australia and Brazil have been sidelined in the build up to lower trade surpluses and higher retail growth expanding not just Landrover but also our franchises from Cotton and Agri exports and a new market for Management and Consulting Services in China and South East Asia.

The Taper past ( it will last till September 2014) and India starting on a recovery path, markets have to recognise the Depth in India as speculators continue to keep coming back to old favorites that were not more than tangentially aligned to the new Global equations like the frog that sips back everytime he succeeds in taking a new step or two to get out of the well

11 AM Update: (I agree with SS on CNBC 18 again), One should just wait out the falling knives and start buying towards the close of day today after 1400 hrs instead of the rush to sell 6200 calls or especially Axis and ICICI Bank Calls which are well worth buying (ATM) 

Fixed Income markets contrary to expectations of the 8.75% yield on the Ten year bond losing again because of Fiscal impacts in the last quarter of the year, may in fact move back behind 8.5% lines as Spending cuts materialise to balance out the missing $$$ in Rvenues and Disinvestment charges ( which may still come out on top) However equity indices will depend on only inflows into the select basket of scrips including Bharti and ITC in FMCG and IDFC , ICICI Bank, HDFC Bank and YES Bank, or other midcap selections outside earlier.  The Power NBFC trading range for example is a very wonderful opportunity for those willing to wait and watch on India.

Indian Pharma seems to be retaining market interest as $200 mm molecules have more than a dozen opportunities every year in a 2012-2016 period even after the first few Big patents have come and gone as more than 30 $ 5 bln patents expire. Teva’s first few generic applications being rejected upholding current patents in the USA may also not stop them from coming out on the winning side in revenues on the vast US market opportunity, while  Indian domestic business is still less than $10 Bln and probably can grow 5-6 times from here.

Banknifty has a bottom at 11200 so today’s snap southward may not hold after 1400 hours in closing trades before the last session of the week tomorrow. Gold swipes big losses in today’s trade as the Global liquidity shrinkage impacts runaway trades in Precious metals led by Gold and one assumes even Crude and Real Estate markets at least outside the USA. However, even limited trading volumes for importers, ne does not expect India investors allowing anyone here a win with significant short trades in the metal. International prices of Gold may well breach the $1000 per pound mark. They are currently trading at $1200 post taper announcements.

 

India Morning Report: HUL divines the uptrend, shift in stock weights

NEW DELHI/INDIA, 16NOV08 - Klaus Schwab, Execu...
NEW DELHI/INDIA, 16NOV08 – Klaus Schwab, Executive Chairman, World Economic Forum, Narendra Modi, Chief Minister of Gujarat, K.V. Kamath, Managing Director and Chief Executive Officer, ICICI Bank; and President, Confederation of Indian Industry at the welcome lunch for the World Economic Forum’s India Economic Summit 2008 in New Delhi, 16-18 November 2008. Copyright World Economic Forum ( http://www.weforum.org )/Photo by Norbert Schiller (Photo credit: Wikipedia)

 

One part of the funding trade is of course another substitution from IT into post result scrips including private banks. Another reinforcing trend for the market is the return of interest to Mid Caps like Tata Global Beverages for the Coffee Auction expansion in their Global Supply chain effort and the Starbucks JV. More importantly however, HUL’s mid trend reinforcing of Ad spends by 24% has signaled more than return of its brands in that despite its lack of growth in soaps and detergents as in Personal Care by 16% nd in Food (9%) and Beverages (16%) , it seems to have forced the hat off ITC which has gone into a tailspin with investors likely to exit as the funding trade returns to HUL instead. Bharti is still strong however, and likely after HUL is not taken by a majority of brokers (from old times more than anything else)

 

ITC wll return to favor as an in trend consumer staples scrip as its Consumer Brands fared pretty well and they have already taken big ad spend jumps in a 2012 quarter instead. Also P&G despite its continuing domination of US markets has not ventured that strngly upon India as China walked away with most of the “Middle Class” Consumer equations leaving India’s non encouraging performance a fundamental back bone of most Global Consumer staples

 

Nifty is strong at 6150 as Monday morning sees uick exits from IT trades for another day with the bulls before the end of next week. Banknifty is finally catching on strong results and has crossed into 11000 so there is speculative interest there to take it to 12000 in a rush.

 

In Autos, CV Sales continue to scare investors and bankers, and it may hit NBFCs and Banks with Auto portfolios as well and Maruti’s recovery is pretty much incomplete with a return to barely 100,000 cars a month rate in the last two months. Justdial success was an eyeopener for sceptics but is likely a Jubilant/Talwalkars repeat in the trade being years’ ahead of the performance volumes not unlike the 2001 dotcom boom (and bust)

 

Interest returning to Metals and Energy would be a good sign for the market to retain higher volumes and move past 6400 levels for the longer term if a recovery oes come to substantiate higher EM flows that will definitely prop up Indian equities. Bonds are still twirling as yields still hope for no repo rate hikes by mid week . If there is a repo rate hike therefore yields will move further north and the Rupee in the offshore NDF market and in bank trading will lose some sheen even as other EMs catch up on the No Taper news, now becoming the new market basis for further Economic clairvoyance

 

Signing off, Essar Oil’s squeeze on GRMs to $6.98 could be in fact a positive sign for the Energy scrips as it means international prices of crude are weak and that other efficient producers(refiners) may still be able to score on their GRMs . India is not currently on Import Parity pricing but on Trade Parity ricing with 20% weightage on Exports and the Government may well ski the Ketan Parikh committee recommendations for this term.

 

ICICI Bank performance is instructively better, and Bank nifty would do well to exit all pessimistic trades shackling it for the last 2 odd months, also PSU Banks at the bottom like Union Bank esp are unlikely to return. Some among them have since jettisoned Bulk DEposits to break the negative attern in the product’s impact on the bottomline but unless REpo rates stop moving a higher cost of funds will be the norm for those in bulk deposits and LCR inspired wholesale funding only model shifts.

 

 

 

India Morning Report: Markets consolidate to new 6350 range/top

Beijing subway
Beijing subway (Photo credit: doubleaf)

 

The IT correction of last week already got used into the 6200 mark as positive results keep positive momentum on global news for the Dollar backing off. As BGI (Blackrock) and Vanguard welcome back funds into Emerging markets US yields and Bond Funds may not get that much investor interest returning and markets like Korea and India should thus be beneficiaries in the ensuing inflows to ‘EMs’

 

Thus ‘uncomplexed’ the flow however is likely to still not be emboldened by the fears of an asset bubble in China as  further improvement of House prices by more than 15 and 16% in Beijing and Shanghai keeps China the easiest target for Hot money flows probably now getting more focus on to its fixed rate currency. Thus an unforeseen window for pressures n the currency though the currency-markets hedge is no longer holding and correlation between equities and currencies will be kept by the broader money flows of whatever magnitude

 

Metals are a good pick for Macquarie which is among the few doubling down on IT post results with the rupee at 61-62

 

YES Bank will likely bring back bigger and better position trades to the Banknifty which is right now sprawled between ‘PSU having been whacked too hard’ strategy and ‘Private banks being the only worth’ bidders who for some reason are getting shorted on ICICI Bank, the bank’s own dealers likely not to blame. ITC and ING Vysya will follow the lead of the banks as most select scrips in portfolios are not adding further positions otherwise except for further small window trades in the delta to the Top from here. Is more discussion on RWA arrangements in India possible because though instruments are merely traditional ones predominantly, Basel III treatment could possibly be more rigorous and Indian Banks are mostly getting a free ride except for the large move to NPAs which is limited to bad quality portfolios.  A Bank promoter for instance recently suggested he has only 3% Tier II Capital and 13-14% Tier I Capital which is true for this particular bank and showcases the thinking on Capital /Leverage in India and the potential for the banks to grow having come thus far in an untapped market and running at 3X the GDP in growth in lending if a little focus is maintained on bank governance

 

HDFC posted a perfect quarter except for the Bank dividend having already been distributed in the First quarter dipping the expected NII to a posted INR 18.14 Bln. The year on year growth is safe and sold loans constitute less than 10% of their outstanding book while still earning the bank 129 basis points. NIMs increase for the institution through the year and the first quarter’s 3.9% increased to 4.1% yesterday(as of September 2013)

 

The news of a fund crunch in Jet Airways or the CBI action thus far proceeding against KM Birla and other industrialists is likely to become the focus of the “Bad India, Dull India” news flow and may merit immediate policy action but overall market participants are well aware of the limitations of policy action from an outgoing government. FIPB was also postponed for day after tomorrow having approved INR 33 Bln worth almost a month ago.

 

 

 

 

 

 

 

 

 

 

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